Brazilian law counters bribery, corruption among officials

Brazil is doing more to keep its officials honest. The nation’s new anti-bribery law, the Clean Company Act, was signed into law last year, and became effective in January. The act was passed in response to claims of corruption throughout Brazil. Even without the recent charges of wrongdoing, Brazil was moving to adopt such a rule because such rules were supported by the Organization for Economic Cooperation and Development (OECD) countries, as well as the treaties and associations which include Brazil as a signatory.

Under the new rule, there are administrative and judicial sanctions. Fines are between 0.1 percent and 20 percent of a company’s gross revenue from the prior year. If gross revenue is not known, fines are between $3,000 and $30 million. The payment does not exempt a company from paying losses generated to the government as a consequence of its wrongdoings.

Also, the new law applies to businesses, foundations, as well as associations and foreign companies with an office, branch or subsidiary in Brazil, according to InsideCounsel.

What is unique about Brazil’s law when compared to similar laws in other nations?

“Unlike the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA), the Brazilian Clean Companies Act imposes strict liability to a legal entity for the corrupt acts of their employees, vendors, or third party contractors,” Jose Compagno, EY’s Brazil leader for Fraud Investigation and Dispute Services, explained to InsideCounsel.

In addition, when it comes to the Brazil law, “legal entities can be held liable for acts committed in their interest or for their benefit, either exclusively or not,” Compagno added.

“In other words, even if the company had no knowledge or intention to benefit from any fraud or corruption, the company is still held legally responsible,” he said.

The law is also different because there are no criminal charges. Also, unlike the FCPA, Brazil’s law is not limited to acts involving foreign officials, InsideCounsel reported. It prohibits bribery by local and foreign government officials. And when it comes to intent, the FCPA requires the government to prove that the defendants intended to engage in illegal conduct.

Overall, it is important that the Brazil law requires strict liability. The act puts liability on companies – which is a change. Before, only individuals were liable for corruption, according to a blog post from The Wall Street Journal.

“Brazilian authorities do not need to show that a person or company intended to violate the law—the fact that a bribe was paid to a public official is sufficient to establish liability,” InsideCounselreported.

Enforcement of the Brazil law is unique, too. “There are a very large number of entities enforcing the law. This is making companies quite scared,” Matteson Ellis, an attorney who works in the field, told The Journal. “What is a multinational company to do if they’re operating all over the country? Are they subject to risk at all levels of government? Under the language of the statute, they are.”

And when it comes to public bids, if a company was found to have “unfairly impacted the process, even if they did not pay any bribe to government officials, they will be held legally responsible,” Compagno said.

Looking ahead, it is too early to tell if the new law will be successful, Compagno said.

“Many companies, especially the larger, more sophisticated ones, have taken it seriously and are adapting their governance structures accordingly and putting into place anti-corruption and compliance programs,” he told InsideCounsel. “The government has been very proactive in writing the law, creating awareness, and having a constructive dialogue with the business community. The government still needs to give more specific guidelines for the law and for the criteria of the .1 percent to 20 percent of revenues financial sanctions. They also are working on and need to put into place their monitoring and enforcement plans.”